Automotive Finance Market Size, Share & Trends Analysis Report By Provider Type (Banks, OEMs), By Finance Type (Direct, Indirect), By Purpose Type (Loan, Leasing), By Vehicle Type, And Segment Forecasts, 2019 - 2026

Industry Insights

The global automotive finance market size was valued at USD 220.18 billion in 2019 and is expected to exhibit a CAGR of 6.7% from 2020 to 2026. The incorporation of attractive technology-specific features in the latest automotive parts and the use of good quality materials are leading to a surge in automotive sales, owing to the increasing customer base. The increasing investments in autonomous vehicles prompt financing from credit unions, dealers, and banks, which is expected to fuel the market growth.

The number of automotive finance customers is increasing owing to the emerging trend of digitalization, an increase in the use of online services, superior telematics, and advancements in blockchain technology. In order to obtain a quick and hassle-free financing for new or used vehicles, customers prefer finance providers who offer data-driven consulting services. These services help determine suitable vehicle as well as a financial scheme that best suit interests and requirements of the consumers.

There have been significant advancements in the automotive industry over the last decade due to the development of highly automated digital vehicles. Innovative technologies are being proficiently deployed by automotive manufacturers and OEMs in their products for increasing their customer base. The use of predictive analytics by financers helps customers in better decision-making and securing the best deal available in the market. Moreover, predictive analytics enable financers to personalize automotive finance packages to meet the consumer’s needs.

The market growth is further driven by the implementation of new business models and development of inventive strategies by the market players. The players aim to explore the emerging trends, such as electric vehicles and connected vehicle technologies. Automotive finance enables middle-class individuals to easily buy or rent a vehicle of their choice, which is otherwise difficult for them due to budget constraints. It also allows customers to cancel their previously finalized deal with no financial penalty, if they find a better deal.

The leading market players are expected to introduce automotive finance as a smarter debt collection and recovery tactic to reduce default rates. This is expected to create new growth opportunities for the automotive finance market. However, due to rising environmental issues (as a result of increased pollution levels), certain automotive eco-monitoring regulations are being enforced by the U.S. government. Furthermore, stringent regulations regarding credit provision are projected to hinder the market growth to a considerable extent. Nevertheless,automotive financiers are reframing their strategies for products and services and OEMs are modifying their operations for manufacturing eco-friendly vehicles.

Provider Type Insights

The banks segment is expected to generate the highest revenue over the forecast period, attributed to fast processing features with the requirement for minimum documentation, in addition to high-reliability features. Banks offer flexible tenures (ranging from 12 to 60 months) for repayments. Since customers are familiar with the financial procedures of banks, they are willing to take loans or other financial support from banks.

The OEMs and other financial institutions segments are projected to witness significant growth over the forecast period. Automotive OEMs offer better after-sales services owing to the availability of identical vehicle parts, as that of the vehicle financed, for the purpose of replacement or repair. Furthermore, OEMs are now focusing on ensuring the delivery of superior products at competitive pricing.Other financial institutions include independent consumer finance or specialized vehicle leasing companies that provide financial services for new and used vehicles.

Finance Type Insights

Based on finance type, the market is segmented into direct finance and indirect finance. The indirect finance type segment is gaining momentum since the past few years and is projected to register the fastest growth over the forecast period. The most significant benefit of this finance type is the on-site provision of expert advice by independent finance specialists to ensure that clients determine the best way to finance a vehicle as and when required. Dealers approach several lenders to explore various financing options that best suit their customers’ requirements.

The direct finance type is expected to remain the most widely adopted method of financing a vehicle. Consumers are liable for determining the financing source that meets their requirements. They are required to personally finalize their preferred vehicle and loan/leasing scheme with this finance type. Generally, banks provide this type of financing service that involves exploration of different schemes, research, and decision-making by the user.

Purpose Type Insights

Leasing is anticipated to emerge as the fastest-growing segment over the forecast period. The number of automotive leasing providers in emerging economies, such as China, India, and Japan is increasing. Owing to the evolving market trends and changing customer behavior, millennials consider leasing to be a better opportunity for owning a vehicle featuring the latest automotive technology without actually paying the total cost of the vehicle. Vehicle leasing is considered to be one of the unexplored businesses that holds immense growth opportunities.

The loans segment is estimated to hold a major market share as loans have been a standard method of purchasing a car by most of the world’s population. In developed countries, the automotive loan market is saturated. It is gaining momentum in emerging countries, such as China and India. Several online mobile applications have been developed to calculate the monthly loan and interest amounts for the financing tenure to enable customers to determine their monthly spending plan and payment options for automotive finance scheme.

Vehicle Type Insights

On the basis of vehicle type, the market is bifurcated into commercial and passenger vehicles. The commercial vehicles segment held a significant market share in 2019. As commercial vehicles are expensive as compared to other vehicles, various financial institutions and banks have introduced affordable loan schemes that include simple terms and conditions. Also, the processing time required for approving commercial vehicle loan is less as compared to passenger vehicle loan.

The passenger vehicles segment is expected to emerge as the fastest-growing vehicle type over the forecast period. The growth can be attributed to the changing consumer mindset regarding leveraging vehicles and their willingness to opt for loans and vehicle leases in their early working years. Moreover, the rise in the number of new passenger car registrations, the growing number of females driving vehicles, and the emergence of new generation riders are the factors driving the segment growth. The availability of varied repayment options in passenger vehicle loans is expected to create growth opportunities for the segment.

Regional Insights

Europe dominated the global market in terms of revenue in 2019, attributed to the concentration of providers of automotive finance services. The finance service providers in the region are focusing on offering insurance, maintenance, and fleet services. Furthermore, the region’s robust advertising industry has led to increased awareness regarding automotive finance schemes among individuals, thereby, increasing the demand for automotive finance in the region.

Asia Pacific is estimated to witness significant growth over the forecast period, attributed to the increasing number of favorable government initiatives, especially in India, China, and Japan, to maintain consumer interest and promote growth in the automotive industry. Furthermore, the automotive financing market in Asia Pacific has become highly competitive with an increase in the number of used-car outlets and vehicle showrooms. Moreover, a decline in automotive loan rates in the region is further expected to propel the regional growth.

Automotive Finance Market Share Insights

Major market players include Ally Financial; GM Financial Inc.; Daimler Financial Services; Toyota Motor Credit Corporation; Hitachi Capital; and Ford Motor Credit Company. The key players are positioning and offering their services online to offer new and innovative channels of communication. They emphasize on providing special loan packages coupled with funding for insurance services. In addition, the companies focus on tying up with business customers, such as transportation start-ups and car rental companies to strengthen their market presence.

The emerging market players are focusing on entering into strategic partnerships and acquisitions to boost their market shares and to establish a global footprint. Moreover, they are collaborating with banks and automotive dealers to gain a competitive edge. The players are also investing in the development of online payment mobile applications, in R&D activities, and for offering superior quality consultation and services to customers. The quality consultation and services initiative by market players is aimed at offering cost-effective and reliable automotive finance solutions and services.

Report Scope

Segments Covered in the Report

This report forecasts revenue growth at global, regional, and country levels and provides an analysis of the latest industry trends in each of the sub-segments from 2015 to 2026. For the purpose of this study, Grand View Research has segmented the global automotive finance market report based on provider type, finance type, purpose type, vehicle type, and region:

• Provider Type Outlook (Revenue, USD Billion, 2015 - 2026)

  • Banks

  • OEMs

  • Other Financial Institutions

• Finance Type Outlook (Revenue, USD Billion, 2015 - 2026)

  • Direct

  • Indirect

• Purpose Type Outlook (Revenue, USD Billion, 2015 - 2026)

  • Loan

  • Leasing

  • Others

• Vehicle Type Outlook (Revenue, USD Billion, 2015 - 2026)

  • Commercial Vehicles

  • Passenger Vehicles

• Regional Outlook (Revenue, USD Billion, 2015 - 2026)

  • North America

    • U.S.

    • Canada

  • Europe

    • Germany

    • U.K.

  • Asia Pacific

    • China

    • India

    • Japan

  • Latin America

    • Brazil

  • Middle East & Africa (MEA)

    • South Africa